Question of the Week

Questions of the Week

Co-founder of the Switzer Report
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1. Being a long-term investor who bought into Challenger (CGF) about 2.5 years ago at levels around $9, what do you think about their SPP (share purchase plan) currently on offer? Similarly, is the Qantas SPP worth buying into given a longterm time frame? 

I am not a fan of Challenger, and now that it is trading below the institutional placement price of $4.89, I would be a little wary. But because it has gone down, you will pay the weighted average trading price over the 5 days to the closing date of 21 July, less a 2% discount. According to FNArena, the analysts have a target price of $5.03. All 7 recommendations are “neutral”. 

I am a little more positive on Qantas. The SPP date has also been extended by two weeks to 5 August, and the final price will now be the lesser of $3.65 and the weighted average trading price in the 5 days up to 5 August, less a 2.5% discount. The 5 broker analysts have a target price of $4.37, with 4 buy recommendations and 1 sell recommendation.

2. It’s obvious that there is a demand and need for counter hackers with the internet. How does one assess the financial metrics of HACK please?

Cybersecurity is certainly a ‘growth’ sector. The Betashares exchange traded fund HACK tracks an index from Nasdaq, the Nasdaq CTA Cybersecurity Index. The index has been a strong performer. 

It is designed to track the performance of companies engaged in the Cybersecurity segment of the technology and industrial sectors. The Index includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers and mobile devices in order to provide protection of the integrity of data and network operations. There are 43 constituent companies, with the largest, Crowdstrike Holdings, having a weight of 7.0%. 

In regard to financial metrics, the only number I can see is a trailing PE for the index (I assume weighted by stock) of 29.7 times. Apart from that, you are really left on your own. 

3. I hold some Speedcast (SDA) shares which have been suspended since February. I’m not able to make sense of the announcements but it does not look like anything will be left for shareholders as they’ve filed for Chapter 11 bankruptcy. When will I be able to access the capital loss? Since suspension, there have been three notices of change of substantial shareholders. How is that possible for a suspended stock? 

Sorry to be the bearer of bad news, but I would assume that you will get nothing. Talk to the Administrator in regard to when you can access the capital loss. 

Regarding the change in substantial shareholder, the one I looked at (which was lodged on 6 July) related mainly to changes made in November/December/January 2020. 

4. What’s your thoughts on Oil Search (OSH)? Can the Company sustain the losses? Why is it the least preferred stock in the Energy Sector?

My least preferred oil stock. I don’t like PNG risk, which some argue is a “basket case”. 

Oil Search said in April that they have a break-even cost of production of US$15.60 boe, so I am not sure I understand your question about “sustaining losses”. 

According to FNArena, the analysts have a target price of $3.39. Range is a low of $2.45 from Credit Suisse to a high of $4.30 from UBS. 

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Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances. 

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